Disputes Emerge as Netanyahu Starts Work on New Israel Govt

Prime Minister Benjamin Netanyahu began talks Thursday to form a new Israeli government, which will have to mend shattered ties with Washington, while tackling pressing social and security issues.

After a bitterly fought campaign that exposed deep splits within Israeli society and a damaging rift with key ally Washington, Netanyahu knuckled down to the unenviable task of building a coalition likely to be dominated by right-wing and religious parties.

By mid-morning, disputes were already emerging over the allocation of key portfolios and positions of prestige, in an indicator of likely problems in piecing together an operational government.

The new coalition will have to hit the ground running in order to shore up shattered ties with the administration of U.S. President Barack Obama and address the divisions within Israeli society.

It will also have to handle an emerging nuclear deal with Iran, which has been vehemently opposed by Netanyahu, as well as the imminent threat of Palestinian legal action at the International Criminal Court early next month.

As he formally accepted the task of building a government late Wednesday, Netanyahu pledged that Israel would hold out a "hand of peace" to the Palestinians and would make sure to patch up U.S. ties, while continuing to fight against the Iran deal sought by Washington.

But after a dirty campaign of inflammatory slogans and statements, people both at home and abroad will be looking for actions not words.

Netanyahu himself was at the centre of most of the controversy after he ruled out the establishment of a Palestinian state if reelected, pledged to build more settler homes in annexed east Jerusalem and played the race card at the expense of Israel's Arab minority.

For now, Netanyahu's focus is likely to be squarely on the marathon talks between his rightwing Likud and the six parties that have thrown their support behind him.

With each party demanding its share, Netanyahu has four weeks to complete the task, although he can get a 14-day extension if necessary.

At this stage, the only certain appointment is that of Kulanu's Moshe Kahlon as finance minister in line with a pre-election pledge by Netanyahu.

But the party made headlines Thursday by boycotting their opening meeting with Likud after hearing that Netanyahu intended to hand the chairmanship of the parliamentary finance committee to UTJ.

That position is seen as crucial for Kahlon if he is to push through reforms that will tackle Israel's burgeoning housing crisis and bring down the soaring cost of living.

So far, Netanyahu has ruled out the option of a unity government with Isaac Herzog's centre-left Zionist Union, which came second in the March 17 election with 24 seats and has pledged to enter the opposition.

But Likud's Gilad Erdan said the possibility was still on the table -- if the party's "natural allies" did not lower their demands.

"If our partners demand unreasonable things and time is running out, in the end a situation could be created in which the choice will be either another round of elections -- or to approach the less-natural partners," he said.

But Herzog issued a statement stressing that his party would "be a strong opposition. All the rest is media spin."

Since the election, Netanyahu has sought to backtrack on his remarks on a Palestinian state, and issued a public apology to the Arab community.

But the bad blood with Washington may take time to resolve, with the issue of the Iran talks and how to resolve the conflict with the Palestinians at the heart of an escalating dispute.